In advance of the publication of our 2017 Sustainability Report, Mindy Lubber, Chief Executive Officer and President of the sustainability nonprofit organization Ceres, sat down for an interview with Dr. Mehmood Khan, PepsiCo’s Vice Chairman and Chief Scientific Officer, Global Research and Development. They discussed topics ranging from PepsiCo’s progress and challenges to business integration and governance. PepsiCo has been engaging with Ceres on a breadth of sustainability issues since joining the Ceres Company Network in 2009.
Q: Your Performance with Purpose 2025 goals are ambitious. How would you describe PepsiCo's progress against them so far?
A: It has been nearly two years since we announced a new set of ten-year goals under our Performance with Purpose vision and I’m truly proud of the progress we’ve made already.
We’re continuing to transform many of the products we make, and how we make them. We have reformulated certain classic products, like 7UP and Mirinda, which now have at least 30 to 50 percent less added sugars in dozens of markets around the world. And we’ve launched some great new products, such as Tropicana Kids, LIFEWTR and Quaker Overnight Oats, which marry the convenience and great taste that consumers want with the nutrition and hydration they need. Drinkfinity is another interesting proposition because it's a direct-to-consumer beverage that provides hydration as well as a light environmental footprint. These are important steps in transforming our portfolio.
How we source our ingredients is also changing fast. As of the end of 2017, nearly 80 percent of our directly sourced crops are grown by farmers engaged through our Sustainable Farming Program. We’re helping them adopt more sustainable practices, increase yields and improve their livelihoods. This is a significant contribution to catalyzing systemic change in our food system; something we can do because of PepsiCo’s scale and reach.
We also continue to contribute to thriving communities around the world. For example, we established a goal to give 25 million people access to safe water by 2025. This year, we reached nearly 16 million people, which is superb progress.
Q: So, are there areas where you feel progress has not been strong enough?
A: Of course, we do still have a long way to go. We've made tremendous strides in transforming our portfolio, yet we need to do more to lower added sugars, sodium and saturated fat across our portfolio, especially outside of our biggest markets. We need to keep momentum going on innovation, particularly for underdeveloped markets where there is a big need for better nutrition at an affordable price.
In the area of plastic waste, we recognize that there remains a challenge. Our goal is to strive for all of our packaging to be recyclable, compostable, or biodegradable. And we continue to invest in technology within the company and in consortium with the industry in an effort to get the technical unlocks. In the meantime, we continue to work to help boost current recycling rates.
Q: Are you confident and comfortable that your sustainability goals are building the core of the business in a way you need to grow?
A: It's a win-win for us. Consumers are increasingly nutrition conscious, so as we improve nutrition, we are anticipating and responding to this trend. There is growth in these categories. Increasingly, other stakeholders expect it of us as well, including regulators.
We are working to reduce our environmental footprint because it’s the right thing to do, but also because maintaining our license to operate depends on us behaving responsibly and, sometimes, taking a lead. Water is a good example. If you can't manage water resources sustainably and they become depleted, agriculture will struggle. Without agriculture, there is no food and beverage industry. PepsiCo has dedicated expertise and resources to this challenge.
Q: What are the barriers to moving faster and at greater scale?
A: The goals that take the most work may not show the fastest results.
Even for an organization of our size, much of the change we want to see is outside our direct control. Take water consumption or greenhouse gas emissions, for example. We’ve signed up to science-based targets that mean we can contribute to limiting global temperature increase to 2˚ Celsius, but most of our footprints are in our supply chain. To have an impact there, we have to build coalitions and help to develop and spread best practices. That takes time.
There are also technical challenges for which we need to find new and alternative solutions. Packaging waste is an example. We are putting substantial resources into research and development ourselves but, across the world, there’s still insufficient investment focused on addressing our greatest shared challenges.
Q: How have you integrated your goals into your governance and strategic planning?
A: First of all, sustainability at PepsiCo is managed at the very highest level. We created a Board subcommittee focused on sustainability. Our executive team is accountable for our progress in meeting our goals—and our bonus program directly links bonus awards to our success in achieving sustainability goals.
Sustainability is a key factor in decision-making. If we want to add a new manufacturing line or acquire a new business, the capital approval request includes a line saying that this meets our sustainability agenda. Exceptions are made only rarely.
For decisions about new product development, sustainability is a key element. What is the packaging impact? Are carbon and water use reductions designed in? We have created tools to ensure that these factors are taken into account, with real time guidance for our project leaders.
Q: How are you using transparency and disclosure as a tool for getting results?
A: Reporting is about allowing stakeholders to scrutinize what we are doing and being open to outside advice from partner organizations such as Ceres. We’re all still students when it comes to building a more sustainable world. Collaboration and well-intended criticism can help us to get where we need to go.
We’re always looking for ways to extend our transparency — this year, we have published a separate PwP Performance Metrics sheet to make it easier to understand our progress at a glance. For more detail, our online A–Z Topics is an extensive and regularly updated resource.
Q: What gives you hope that the food and beverage industry will achieve greater sustainability?
A: We believe we have no choice. Our license to operate depends on it. Consumers and other stakeholders increasingly demand it of the entire food and beverage industry.
When we launched Performance with Purpose in 2006, we were leading our industry. Within a few years, others had caught up. We set ambitious new goals in 2016 and we’re now near the top of the pack again, but it will be difficult to maintain that because so many of our peers are also taking action. Our industry is changing fast, and that’s great to see.